DEPUTY COMMISSION OF INCOME TAX, CEN. CIR.-1(1), KOLKATA, KOLKATA vs. M/S. TOPLIGHT MERCHANTILES PRIVATE LIMITED, KOLKATA

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ITA 507/KOL/2026Status: DisposedITAT Kolkata11 September 2026AY 2013-1411 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, agreeing that the assessee had successfully discharged its onus by proving the identity, creditworthiness, and genuineness of the share transaction. The AO's reliance on uncompiled 'source of source' notices and a retracted statement was found to be misplaced.

What were the facts?

The Revenue appealed against the deletion of an addition of Rs. 1,63,78,500/- made by the AO on account of share capital/premium, treating it as unexplained cash credit. The assessee had provided details of share subscribers, who were group companies, along with valuation reports and other documentary evidence.

What were the issues?

Whether the addition on account of share capital/premium as unexplained cash credit under Section 68 is justified when the assessee has provided sufficient evidence of identity, creditworthiness, and genuineness of the transaction.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C,Section 56(2)(viib)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

For Appellant: Shri Akkal Dudhwewala, Ms. Vidhi Ladia, ARs
For Respondent: Shri Dipu Koley, DR
Hearing: 27.08.2026Pronounced: 11.09.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-20 (hereinafter referred to as the “Ld. CIT(A)”] dated 21.04.2025 for the AY 2013-14.

2.

The only issue raised by the Revenue in the various grounds of appeal is against the deletion of addition of Rs.1,63,78,500/- by the ld. CIT(A) as made by the ld. AO in respect of share capital / share premium by treating the same as unexplained

ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 cash credit u/s 68 of the Income-tax Act, 1961 (hereinafter referred to as the 'Act').

3.

The facts in brief are that, the assessee has filed the return of income on 21.09.2013 showing NIL total income. The case of the assessee was selected for scrutiny. Subsequently, statutory notices u/s 143(2) & 142(1) of the Act were issued, which were complied with by the assessee. The ld. AO had called for the details/evidences in respect of share capital/share premium issued by the assessee. The assessee had furnished the details of the share subscribers, all of whom were group companies along with the report obtained in terms of Rule 11UA in respect of valuation of the shares. After examining the details, he issued notices u/s 133(6) of the Act to all the shareholder(s). Complying with the said notices, the share subscribers had submitted before the ld. AO, all the information comprising names, addresses, PAN Numbers, copies of audited balance sheets, profit and loss accounts, audited reports, bank accounts, etc. These shareholders had inter-alia also furnished the relevant details and evidences relating to their source of payments as well. After going through these details, the AO further issued notices u/s 133(6) to the ‘source of source’ companies, which remained uncompiled. Due to this non- compliance and by referring to a report of DGIT(Inv), Kolkata, the AO treated the share capital /share premium of Rs. 1,63,87,500/- as unexplained cash credit and added to the income of the assessee in the assessment framed. The AO also

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ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 estimated and added commission of Rs.81,938/- u/s 69C of the Act.

4.

In the appellate proceedings, the ld. CIT(A) deleted the addition and allowed the appeal of the assessee. The relevant operative portion of the order is as under:-

5.2 Further, on perusal of the assessment order and the written submission of the appellant, it is clearly evident that transactions with respect to issue of Share Capital amounting to Rs. 1,63,87,500/- from body corporate are duly accounted in the audited accounts of the appellant company. As per the submission, during the course of assessment proceedings, the appellant had adduced the ITR Acknowledgement, Audited Accounts, Relevant bank statement, Source of fund, Share Application Form of all the share applicants. Further, the share applicant companies had enough own funds to invest in the appellant company as evident from the audited accounts of the share applicants. Further, the applicants filed reply u/s 133(6) to the AO. The appellant has also adduced further evidences while assessment proceedings to establish the following points regarding the share applicant company: 1.The share applicant company is registered with ROC and has been duly filing its income tax returns. 2. The share application money was received through proper banking channels. 3. The share applicant company was active and compliant as on the date of Assessment Order and has made regular compliance as evident from the master details available at the Ministry of Corporate Affairs website. 4.Copy of the Balance Sheet along with the return filing Acknowledgment of the share applicant was also provided during the assessment proceedings. 5. The company had enough net worth to make investment in the assessee company. 6. The account of the assessee company and the share applicant are duly audited and necessary compliance has been made as per Income Tax Act and Company Law. 7. Reply to notice u/s 133(6)

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ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 Further, appellant relying on the following judgements where it has been held that addition on account of share capital u/s68 cannot be made where Identity, Creditworthiness and Genuineness has been proved. The said judgements are being produced as under:- PCIT v. Adamine Construction (P) Ltd [2019] 107 taxmann.com 85 (SC) dated 14.09.2018 DCIT v. Global Mercantile P. Ltd. (2016) 157 ITD 924 (Kol) (Tri) [2016] Wellman Wacoma Ltd, vs. 3CIT 46 CCH 456 T Kolkata ITAT DCIT vs. Zimkele CommodealPvt. Ltd. 47 CCH 696 (Kolkata ITAT) CIT vs. Orissa Corporation Limited 159 ITR 78 (SC) The appellant has submitted regarding three basic ingredients u/s 68 as under; “Identity: The share applicant is a body corporate, registered with the ROC and is available at the given address. The share applicants have furnished copy of PAN and are registered with ROC having CIN. All the data of such companies are available with Income Tax Department & ROC. The share applicant had duly complied with Notice u/s 133(6) of the Act and submitted all the relevant details and documents. They are also assessed to Income Tax regularly. Therefore, the identity should not be under the scanner in the instant case. Further we are also enclosing recent intimation u/s 143(1) of all the share applicant for the AY 2021-22, which further establishes the identity of share applicant(enclosed in page no. 381-414 of Paper Book as Annexure-F). Genuineness & Creditworthiness: a) The share application money was received through proper banking channels, b) the shareholder had sufficient fund for the purpose of investment & the investments are reflected in their books of account and c) The Share Applicant had complied with Notice u/s 133(6) of the Act d) The share applicant is regularly assessed to Income Tax. Further in this regard, it is pertinent to mention here that the Hon'ble ITAT Kolkata in the case of ITO v/s. Shri. Jamuna Das Gupta in ITA No.692/K/2010 has held that once creditworthiness of the source is proved then the assessee is not responsible for source of source (i.e., 2nd layer). This view has been upheld by the Hon'ble High Court at Calcutta in ITAT-20/2011. All the documents relating to the share transaction like bank statements, Audited Accounts and IT Acknowledgement, etc., proving the genuineness of the transaction were duly submitted before him.” Hence, Appellant has proved the three ingredients u/s 68 i.e.; identity, creditworthiness and genuineness of the share capital transaction as discussed above. Page 4 of 11

ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 Furthermore, the appellant has also submitted that the addition made by the AO is based on surmises and conjectures and without any substantive and concrete basis as the addition made by the AO is solely based on the statement of Pankaj Agarwal which was subsequently retracted by him. Further, The AO has not provided any opportunity to the appellant to cross examine the statement of Mr. Pankaj Agarwal. The appellant relying on the following judgements for not giving the opportunity to cross examine the statement of entry operator:- 1. PCIT vs Rashmi Infrastructure Ltd. (ITAT 99 of 2019, G.A No. 1211 of 2019 dtd. 24.02.2020) 2. CIT Vs Eastern Commercial Enterprises (1994) 210 ITR 103 (Kol HC) 3. Andaman Timber Industries vs. CCE (2015) 281 CTR 241, Hon'ble Supreme Court; 4. Bangodaya Cotton Mills Ltd. vs. CIT (2011) 330 ITR 104, Hon'ble Calcutta High Court; 5. Kishinch and Chellaram vs. CIT (1980) 125 ITR 713, (Hon'ble Supreme Court). 6. M/s R.W Promotions (p) Ltd. Vs. ACIT-Cir-9(3) in ITAT No. 1489 of 2013. (Hon'ble Bombay High Court) 5.2.1 In view of the above facts and discussions made above, I am of the view that the appellant has proved the three ingredients required u/s 68 i.e., Identity, Creditworthiness and Genuineness of the Share Applicants. Further, all the documents pertaining to share applicants i.e., ITR Acknowledgement, Audited Accounts, Bank Statements, Reply u/s 133(6) and Share Allotment Form have been submitted by the appellant. Further, I found that the AO has not given the opportunity to cross examine the entry operator to the appellant. Hence, In view of the above facts and case laws discussed above I found merit in the appellant’s submission and hence, addition on account of Share Capital u/s 68 of Rs. 1,63,87,500/- is deleted. 5.4 Further, vide ground no. 3 the appellant has agitated against the addition of Rs.81,938/- on account of commission to entry operator @0.5% u/s 69C of the Act. Asper AO, the appellant has paid commission charge @0.5% to entry operator for providing services related to arranging share capital to the appellant company. However, appellant in his submission has stated that the AO has made the addition without any basis and only on surmises and conjectures.

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ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 5.4.1 As the ground no. 3 is consequential to Ground no. 1 & 2. Hence, the addition of Rs. 81,938/- on account of Commission u/s 69C is also deleted.” 5. The Ld. DR appearing for the Revenue contended that though the contemporaneous details regarding the source of funds of the shareholders were placed on record but their poor financials were the sole reason for making addition of the share capital / share premium subscribed by them. She further submitted that the assessee was also unable to justify the premium charged upon issuance of shares. According to her therefore, the addition made by the AO should be restored. Per contra, the ld. AR supported the order of ld. CIT(A).

6.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee has raised share capital from group companies by issuing 2,18,500 equity shares of face value of Rs.10/- each at a premium of Rs.65/- per share thereby receiving Rs.1,63,87,500/-as share capital/ share premium. We note that the assessee had furnished the details of all the share subscribers, based on which the ld. AO made independent enquiries from the share subscribers u/s 133(6) of the Act. The records placed before us revealed that the notices issued u/s 133(6) of the Act were served upon the share subscribers which substantiated that they were found existing at their given addresses. The share subscribers had also filed the details including PANs, ITRs, audited financial statements, allotment advices, bank statements, explanation regarding their source of payment. Having perused the details furnished by the share subscribers, we observe that each of

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ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 them held valid PAN and CIN and the proof of service of notices u/s 133(6), which established the identity of the share subscribers. We also observe that, the share subscribers were regular income-tax filers and their financials demonstrated sufficient strength to justify the amounts subscribed by them. The details of their net worth vis- à-vis the amounts paid by them is noted to be as under:

Name of the Shareholders Amount Invested Net Worth(in Rs.) Well Man Tie-up Pvt Ltd 30,00,000 2,25,33,402 Accurate Dealmark Pvt Ltd 25,50,000 1,73,27,620 Seven Star Trades & Services P Ltd 15,00,000 3,27,87,893 TulsiVanijya Pvt Ltd 20,25,000 1,86,38,712 Vaishno Trades & Services Pvt Ltd 25,50,000 3,41,93,225 Parichay Tradelinks Pvt Ltd 22,50,000 1,41,35,196 Kejariwal Mercantiles Co Pvt Ltd 15,00,000 3,57,03,430 Vicky Marketing Services Pvt Ltd 10,12,500 3,21,08,106 7. It is seen that the AO had laid emphasis on the non-compliance of the notices by the companies which constituted the source of funds of the share subscribers to justify the impugned addition. The ld. AR had brought to our notice that, the share subscribers in their replies furnished u/s 133(6) of the Act, had furnished their respective sources of payment along with explanation. It is observed that, investors had also filed the details such as copies of bank statements, PAN cards, financial statements of the other parties who advanced money to the investors substantiating the source of source of funds of the share capital. We find that the ld. AO has not controverted these evidences regarding source of payments filed by the share subscribers. Having gone through these documents, we are in full agreement with the ld. CIT(A) that the shareholders

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ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 had filed the relevant evidences to discharge their onus of substantiating the identity and creditworthiness of the lenders and genuineness of the transactions.

8.

It is further observed that the reference made by the AO to the purported statement of Mr. Pankaj Agarwal was misplaced. Nothing has been brought before us to show that Mr. Pankaj Agarwal had incriminated the assessee in any manner or that he was in charge of the affairs of the shareholders and had admitted to providing accommodation entries. The Revenue was also unable to controvert the finding of the ld. CIT(A) that the statement had been retracted and no cross examination was afforded to the assessee. Coming to the reasonableness of the share premium, which was doubted upon by the Ld. DR, we observe that the shares were issued at the prevailing fair market value of the assessee computed in terms of Section 56(2)(viib) read with Rule 11UA of the Rules. Having gone through the copy of the valuation report, it is observed that the intrinsic value of shares of the assessee was higher than book value due to the market value of the shares & securities held by it due to which the shares issued during the year commanded a premium.

9.

Insofar as the reliance placed by the ld. DR on the decision of the Hon’ble Supreme Court in the case of NRA Iron & Steel Ltd (412 ITR 161) is concerned, we find the facts of that case to be clearly distinguishable. In that case, the investors were found to be non-existent or "phantom" entities upon field inquiry. In the case before us, the investors are identifiable taxpayers who Page 8 of 11

ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 directly responded to notices u/s 133(6) and confirmed the transactions through banking channels. In our view therefore, equating the traceable investors with phantom entities is a leap in logic that cannot be countenanced. The case of the assessee is also squarely covered by a series of decisions of the Hon'ble Jurisdictional High Court namely, (i) PCIT vs. Jealous Commercial Private Limited (308 taxman 80), (ii) PCIT vs. Balaka Vinimay Pvt Ltd (GA No. 2 of 2025)dated 21.07.2025, (iii) PCIT vs. Bright Commodeal Pvt Ltd (ITAT No. 162 of 2025)dated 28.08.2025, (iv) PCIT v. Shipra Enclave (P.) Ltd (183 taxmann.com 413)dated 04.02.2026, (v) PCIT v. Ambe Tex Fab (India) (P.) Ltd (173 taxmann.com 392), (vi) PCIT v. Delta Dealers (P.) Ltd (173 taxmann.com 911), (vii) PCIT v. Goodview Marketing Pvt Ltd (ITAT No. 114 of 2024), (viii) PCIT v. Rajshree Integrated Cold Chain Pvt Ltd (ITAT No. 286 of 2024), (ix) PCIT v. True Man Consultants Pvt Ltd (ITAT No. 203 of 2024), (x) PCIT v. HirakVyapaar Pvt Ltd (ITAT No. 242 of 2023), (xi) PCIT v. One Point Commercial (P.) Ltd (478 ITR183), (xii) PCIT v. Mainak Suppliers Pvt Ltd (ITAT No. 253 of 2023), (xiii) PCIT vs M/s Maninya Comfin Pvt Ltd. ITAT/271/2023 IA No.: GA/1/2023 dated 1.5.2025, (xiv) PCIT vs M/s Sitka Mercantile Pvt Ltd IA No. GA/2/2024, (xv)PCIT vs M/s Hirak Vyaapar Pvt Ltd ITAT/242/2023 IA No. GA/1/2023 dated 3.5.2024, (xvi) PCIT vs M/s Snowhite Infrastructure Pvt Ltd ITAT/108/2024 IA No. :GA/2/2024 dated 15.5.2024, (xvii) PCIT vs M/s Outcome Buildcom Pvt Ltd ITAT/3/2024 IA No. :GA/1/2024 dated 3.5.2024, (xviii) PCIT Vs. Naina Distributors Pvt Ltd ITAT/113/2023IA No. GA/1/2023 dated 28.06.2023, Page 9 of 11

ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14 (xix) Pr. CIT vs Wise Investment Pvt Ltd ITAT/238/2024 IA No. GA/2/2024 dated 06.05.2025, (xx) Pr. CIT Vs Vish Realty Solutions Pvt Ltd ITAT/74/2025 IA No. GA/2/2025 dated 10.07.2025wherein it has been held that where the assessee has discharged its burden of proof by satisfying all three conditions as envisaged u/s 68 of the Act and therefore no addition u/s 68 of the Act is called for.

10.

For the above reasons and circumstances, we do not find any infirmity or defect in the order of the ld. CIT (A) which warrant our interference. Accordingly, we uphold the appellate order by dismissing this ground of the Revenue

11.

In the result, the appeal of the Revenue is dismissed.

Order pronounced on 11.09.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 11.09.2026 Sudip Sarkar, Sr.PS

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ITA No. 507/KOL/2026 M/s Toplight Merchantiles Pvt. ltd; A.Y. 2013-14

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

(Manish Bhoi) Dy. Registrar Income Tax Appellate Tribunal, Kolkata

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